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Obama seeks $4 trillion in cuts; GOP assails call for tax hikes

By Alan Silverleib and Tom Cohen, CNN
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Ryan: Obama 'poisoning wells' with plan
STORY HIGHLIGHTS
  • NEW: Republicans slam President Obama's tax proposal
  • "Doing nothing on the deficit is just not an option," Obama says
  • The president aims to cut the federal debt by $4 trillion over the next 12 years
  • Obama says his plan will help to sharply limit Medicare cost increases

Washington (CNN) -- President Barack Obama unveiled his long-awaited deficit reduction plan Wednesday, calling for a mix of spending reductions and tax hikes that the White House claims would cut federal deficits by $4 trillion over the next 12 years without gutting popular programs such as Medicare and Medicaid.

Obama's plan includes a repeal of the Bush-era tax cuts on families making more than $250,000 annually -- something sought by Democrats but strongly opposed by Republicans. The president also called for the creation of a "debt fail-safe" trigger that would impose automatic across-the-board spending cuts and tax changes in coming years if annual deficits are on track to exceed 2.8% of the nation's gross domestic product.

The president claimed that by building on or adjusting the health care reform bill passed last year, $480 billion would be saved by 2023, followed by an additional $1 trillion in the following decade. For example, he proposed tightly constraining the growth in Medicare costs starting in 2018.

"Doing nothing on the deficit is just not an option," Obama said in the speech at George Washington University, adding that "our debt has grown so large that we could do real damage to the economy if we don't begin a process now to get our fiscal house in order."

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Obama's approach seeks to carve out a political middle ground between conservatives -- who are pushing for deficit reduction based solely on spending cuts and expected economic growth -- and liberals, who are generally resisting entitlement reform and seeking higher corporate and personal taxes.

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He called for political leaders to put aside orthodox party ideology and work together for the good of the country, saying "we can solve this problem" while noting that "any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget."

At the same time, Obama blasted the House Republican 2012 budget proposal unveiled last week, saying it would "lead to a fundamentally different America than the one we've known throughout most of our history."

"These are the kind of cuts that tell us we can't afford the America that I believe in and that I think you believe in," Obama said of the plan by House Budget Committee Chairman Paul Ryan, R-Wisconsin, who sat in the audience Wednesday. "I believe it paints a vision of our future that's deeply pessimistic."

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The administration's package stands in sharp contrast to Ryan's blueprint, which calls for cutting the debt by $4.4 trillion over the next decade while radically overhauling Medicare and Medicaid and dropping the top personal and corporate tax rate to 25%.

GOP leaders, who were briefed by Obama at the White House before the speech, harshly criticized the president's call for higher taxes on wealthier Americans.

"Any plan that starts with job-destroying tax hikes is a non-starter," said House Speaker John Boehner, R-Ohio. "Republicans are fighting for meaningful spending cuts and fighting against any tax increases on American small businesses."

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Ryan said he was "very disappointed" in the president. "What we heard today was a political broadside from our campaigner-in-chief," he said. "Rather than building bridges, he's poisoning wells."

Rep. Jeb Hensarling, R-Texas, said the president's tax proposal set "a new standard for class warfare," while possible GOP presidential contender Newt Gingrich said Obama "continues to operate with a left-wing worldview that will hurt seniors, kill jobs, raise gas prices, and increase our crushing debt."

Under the Obama plan, Pentagon spending would fall by roughly $400 billion by 2023, while federal pensions, agricultural subsidies and other domestic programs would also face the budget ax, according to the White House.

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In total, nonsecurity discretionary spending -- Washington jargon for the 12 percent of the federal budget aside from defense spending, debt payments and the big entitlements such as Medicare, Medicaid, and Social Security -- would be cut by a total of $770 billion over the next 12 years.

The $770 billion figure is in line with recommendations put forward by Obama's bipartisan debt reduction commission last December, according to the White House.

Obama's plan contained no specific proposal for Social Security, the government-run pension plan that will run out of money in coming decades. The president does not believe that the program "is in crisis (or) is a driver of our near-term deficit problems," a White House statement noted.

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But Social Security does face "long-term challenges that are better addressed sooner than later," the statement added, and Obama expressed a willingness to consider changes to help the program maintain its solvency down the road.

Obama said Vice President Joe Biden would begin meeting with legislators from both parties in early May with the aim of forging agreement on a deficit reduction plan by the end of June. According to the White House, the meetings would include eight Congress members and eight senators -- equally split between the two parties.

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The president, however, strongly opposed the proposed Medicare and Medicaid overhaul outlined in Ryan's 2012 GOP budget proposal.

Under Ryan's plan, the government would stop directly paying Medicare bills for senior citizens in 2022. Instead, recipients would choose a plan from a list of private health insurance providers, which the federal government would subsidize. Individuals currently 55 or older would not be affected by the changes.

Medicaid, which provides health care for the disabled and the poor, would be transformed into a series of block grants to the states. Republicans believe state governments would spend the money more efficiently and would benefit from increased flexibility, while Democrats warn that such a move would shred the health care security provided to the most vulnerable Americans in recent generations.

"I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs," Obama said. "I will not tell families with children who have disabilities that they have to fend for themselves. We will reform these programs, but we will not abandon the fundamental commitment this country has kept for generations."

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The Republican "vision is less about reducing the deficit than it is about changing the basic social compact in America," the president asserted. "It ends Medicare as we know it."

At the same time, Obama said that Democrats also must recognize the need for significant change in America's fiscal structure and practices.

"To those in my own party, I say that if we truly believe in a progressive vision of our society, we have the obligation to prove that we can afford our commitments," the president said. "If we believe that government can make a difference in people's lives, we have the obligation to prove that it works -- by making government smarter, leaner and more effective."

As Obama and the Republicans spar over long-term deficit reduction plans, they also need to tackle the budget for the remainder of the current fiscal year, which ends September 30.

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The House is scheduled to vote Thursday on a deal reached late last week that would cut spending for the year by $38.5 billion.

The package cuts funding for a wide range of domestic programs and services, including high-speed rail, emergency first responders and the National Endowment for the Arts.

Under the terms of the deal, roughly $20 billion would be taken from discretionary programs while nearly $18 billion would come from what are known as "changes in mandatory programs," or CHIMPS, which involve programs funded for multiyear blocks that don't require annual spending approval by Congress.

Republicans generally opposed CHIMP cuts because they affect only one year, with funding returning to the preauthorized level in the following year.

Democrats and Republicans also have to contend with an impending vote to raise the nation's debt ceiling. Congress needs to raise the limit before the federal government reaches its legal borrowing limit of $14.29 trillion later this spring or risk a default that could result in a crashing dollar and spiraling interest rates, among other things.

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Republicans have repeatedly stressed that any vote to raise the cap has to be tied to another round of spending cuts or fiscal reforms.

The administration, in contrast, has called for a "clean" vote on the cap, which would raise the limit without adding any conditions. White House Press Secretary Jay Carney has warned that trying to force the issue is tantamount to playing a game of "chicken" with the economy.

While meeting with reporters after his meeting with Obama, however, Boehner indicated that the president might be open to a compromise on that vote.

CNN's Dana Bash, Dan Lothian, and Deirdre Walsh contributed to this report

 
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